When buying a hotel, you’re not just acquiring a business—you’re also making a real estate investment. It’s a balance of finding a property that will generate revenue through its operations but also increase in value over time. As a first-time hotel owner, you’ll want to lower the risk of your investment by choosing a property that is likely to appreciate.
Ericeira, a small surf town near Lisbon, is a great example of how tapping into broader trends can lead to a successful real estate investment. In recent years, the quiet destination has evolved into a tourist hotspot and attracted lifestyle and hospitality brands, significantly driving up real estate prices.
This transformation reflects global trends like the rising popularity of surf destinations, the surge in remote work, and growing tourism across Portugal. While Ericeira has always been a surf haven, it was the arrival of more digital nomads, the launch of trendy accommodations like Selina and Outsite, and the shift to attracting year-round visitors which significantly accelerated its growth.
These are examples of trends that can be tracked to identify other emerging, high-potential locations.
So what should you look for when evaluating locations for your first hotel investment? While no formula guarantees success, here are some patterns and indicators that can guide your search.
#1 Catch the wave
The growth of surf towns often follows a recognizable pattern. First, backpackers are drawn to the area by its affordability and natural beauty. As word spreads and facilities improve, digital nomads and expats arrive for mid to long-term stays. Over time, as the town’s popularity grows, trendy hospitality brands take notice, bringing upscale accommodation and dining options. This progression has been seen in destinations like Canggu in Bali, Taghazout in Morocco, and Santa Teresa in Portugal, where each has transitioned from niche surf spots to popular travel destinations.
You can easily identify popular surf spots with Buythathotel.com’s interactive map. Currently available for Portugal, with plans to expand to Costa Rica and Spain, the map allows prospective hotel buyers to analyze properties based on 15+ data points (POIs), including nearby surf locations.
#2 Smell the coffee
In urban locations, the emergence of specialty coffee shops, trendy bakeries, and even Michelin-starred restaurants can signal an area’s growing desirability.
These venues attract a clientele that values unique, high-quality experiences, highlighting shifts in local culture and lifestyle. Such transformations often pave the way for hospitality investments, enhancing the overall potential of a location.
You can compare locations based on their proximity to Michelin-starred restaurants and other POIs, such as UNESCO sites and natural parks, with Buythathotel.com’s interactive map.
#3 Check the stats
Monitoring tourism statistics is another valuable tool for evaluating a location’s potential. A consistent increase in visitors over the years is a good sign of future growth, especially if paired with other indicators, such as the number of nearby operating hotels and short-term rentals (STR), average daily rates, and occupancy rates.
These factors can provide deeper insights into the area’s attractiveness and its potential for real estate appreciation.
You can use Buythathotel.com’s map to easily check the availability of Airbnbs in the area, helping you assess the local short-term rental market. For a more comprehensive analysis, including insights on new hotel developments and transaction data in your desired location, please contact us.
#4 The Importance of Spending Time in Potential Locations
In addition to analyzing key indicators, spending time in your potential investment location is essential. Engaging with the community and visiting local businesses can uncover valuable insights that data alone may not provide.
To gain a deeper understanding of the area’s dynamics, consider both data analysis and on-the-ground experiences. For instance, visit a trendy coffee shop to observe how many customers are busy working on their laptops, or stop by a local surf shop to inquire about the demand for surf lessons during weekdays.
These firsthand interactions can reveal important trends about the area’s vibrancy and growth potential, and give you a more nuanced understanding of the town or neighborhood.
#5 Combining Data with Gut Feeling
While these indicators are useful, real estate investment also relies heavily on personal intuition. Trusting your gut feeling about an area’s potential and having confidence that it could attract your target audience can drive the success of your investment.
An important principle to remember is that by creating value, you can actively increase the price of your property:
This mindset is crucial in real estate. It’s not just about waiting for an area to grow in value; it’s about how you can add value to your property through operational improvements and developing the right distribution channels.
Identifying high-potential areas for hotel investment, which offer both short-term returns and potential for long-term appreciation, requires a mix of data analysis, first-hand experience, and intuition.
Spending time in your selected area and interacting with the community can reveal unique insights that the numbers might miss. As you explore potential properties, trust your instincts and plan to take an active role in enhancing your property’s value, positioning it for future growth in the evolving hospitality landscape.